Kirloskar Pneumatic Company Limited Q3 FY26 Earnings Call Summary

Summary

Kirloskar Pneumatic Company Limited - Q3 FY 2026 Earnings Call Summary Friday, January 23, 2026 4:00 p.m. (IST)

Event Participants

Executives 3 K. Srinivasan (Managing Director), Ramesh Birajdar (CFO), Jitendra Shah (Company Secretary)

Analysts 10 Ajinkya (KRIIS Portfolio), Amit Shah (Antique Stock Broking), Balasubramanian (Arihant Capital), Eshwar (ithought PMS), Kashyap Javeri (Emkay Investment Management), Khush (Electrum PMS), Kunal Sheth (BK 360 One), Manish (Thinqwise Wealth Managers), Nipun Sharma (VLS Finance), Niraj (White Pine Investment Management), Sahil (Monarch Networth Capital), Sourabh (Oaklane Capital)

Financials & KPIs

Geographic & Segment Commentary

• Refrigeration & Air Conditioning: Contributes ~40% of total revenue. Large project installations at customer sites were delayed 3-6 months, leading to high inventory. Focus is shifting toward the PLI-approved Zephyros (ammonia-based) systems and Khione packages, which have stabilized across application areas.
• Process Gas Systems: Contributes 30%-35% of revenue. The segment is currently flat as the oil and gas sector experiences a lack of large project finalizations globally. Growth is being driven by the MENA region for CNG packages and emerging opportunities in hydrogen and biogas.
• Air Compressors: Contributes ~20% of revenue. Steady quarter driven by the Tezcatlipoca centrifugal compressor. Capacity for this line is being doubled with new German and Japanese machinery expected to be operational by Q1 FY27.

Company-Specific & Strategic Commentary

• Intellectual Property Focus: KPCL filed 106 IPs as of Dec 2025, with ~40 filings per year. Management views IP-driven manufacturing as the core driver for their 20% EBIT margin target.
• Succession Planning: Mr. K. Srinivasan is retiring; Mr. Aman Kirloskar has been appointed as the next Managing Director. The transition is described as a structured 5-year process to integrate the next generation of promoter leadership.
• In-house Manufacturing Shift: To counter global supply chain risks and improve margins, the company is moving from being an “integrator” to a full “manufacturer” (forging, machining, heat treatment in-house), particularly for the new PLI-linked products.
• Product Diversification: The “Other” segment, involving manufacturing components for non-traditional industries, is growing rapidly and will become a reportable segment in Q1 FY27.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Product Strategy (Zephyros & Tezcatlipoca)

• Question: How does the Zephyros ammonia system differ from standard refrigerants? (Balasubramanian)
• Answer: It uses ammonia (natural refrigerant) with zero GWP. KPCL’s IP allows ammonia to be used without corroding copper windings in a semi-hermetic setup. It is 2/3 the cost of traditional imported systems and more efficient (K. Srinivasan).
• Question: What is the status of the smaller A800 centrifugal compressor? (Balasubramanian)
• Answer: It is currently in alpha testing and will launch in Q1. It will be the smallest centrifugal compressor in India, targeting the 600-800 CFM range to replace dry screw compressors (K. Srinivasan).

Order Book & Revenue Mix

• Question: Is the current order book of ₹1,939 crores broad-based? (Sameer)
• Answer: Yes, and importantly, it contains no “large packages” unlike last year. This makes quarterly execution much more predictable and smoother going forward (K. Srinivasan).
• Question: What are “non-traditional” orders? (Sourabh)
• Answer: These are manufacturing-heavy orders where KPCL uses its forging and machining capabilities to build components entirely in-house. These will be reported separately from Q1 FY27 (K. Srinivasan).

Financial Clarity

• Question: Will the employee cost increase be permanent? (Khush)
• Answer: The onetime hit is ₹18.3 crores for gratuity. The recurring impact is only 0.8% to 1% of total costs; it won’t materially impact long-term profitability (K. Srinivasan).
• Question: How can ammonia systems be cost-competitive? (Ajinkya)
• Answer: By manufacturing almost all parts in-house rather than being an integrator. The PLI scheme requires ₹300Cr total investment to achieve the necessary scale (K. Srinivasan).

Key Takeaway

Kirloskar Pneumatic Company Limited (KPCL) reported a steady Q3 FY26, though headline sales were tempered by ₹180 crores in ready inventory that customers were not yet prepared to receive. Despite this, the company maintained a strong order book of ₹1,939 crores, which is structurally superior to previous years due to a higher mix of short-cycle equipment over lumpy, large-scale projects. Strategically, the company is transitioning from a component integrator to a vertically integrated manufacturer, underpinned by the filing of over 100 IPs and a ₹300 crore PLI-linked commitment for natural refrigerant systems (Zephyros). While the oil and gas sector remains sluggish, KPCL is diversifying into component manufacturing for non-traditional sectors and expanding its footprint in the MENA region. Management guided for a strong Q4 to close FY26 with revenues exceeding ₹1,800 crores and a 20%+ growth in PBT, while asserting a return to 20% top-line growth and 20% EBIT margins in the coming fiscal years.